The US dollar has been the backbone of the global economy for decades, but a number of unprecedented economic pressures have people warning of a potential dollar collapse. Is the dollarpocolypse underway or is this just another example of global hysteria?
6 Factors Pressuring the Collapse of the Dollar
1. BRICS nations push for their own currency.
Brazil has been calling for fellow BRICS nations to abandon the dollar by conducting trade in another currency. In total, these countries represent nearly half the world’s population and boast a collective GDP that outpaces the US economy. China, the group’s leading economic power, has recently succeeded in using the Yuan more than the dollar in their cross-border transactions. Given the size and influence of the BRICS nations, a complete shift away from the dollar would deal a massive blow to its hegemony.
2. China’s increasing diplomacy on the world stage.
As an aspiring superpower, China has been eagerly anticipating a dollar collapse. Over the years, it has been strategically establishing the Yuan as a candidate for a world reserve currency. Within the past few years, the Chinese leadership has won conclusive victories to that end by filling in the gaps of waning American diplomacy. For example, China has:
This accumulation of political capital translates directly into economic influence and sends a clear message to the world that the Yuan is a viable alternative to the dollar. Cue the rapid acceleration of de-dollarization.
3. OPEC countries consider accepting Yuan.
Another alarming sign the dollar is collapsing comes as oil-producing nations of the Middle East warm up to the Yuan. For decades, the greenback has maintained dominance by being the exclusive currency for oil transactions. However, China’s increasing influence in the region has opened doors for the rise of the Petroyuan. Saudi Arabia, the largest producer in OPEC, is openly considering trading oil in Yuan. The UAE has gone a step further by selling liquid natural gas in the Chinese currency. The failure of the Petrodollar would single-handedly seal the fate of the greenback.
4. Russia and China working around sanctions.
The West’s attempt to wrangle the Russian war machine and curtail Chinese influence through hefty sanctions has backfired. These measures have only pushed the Kremlin and CCP closer together and concentrated efforts to work around the dollar. China is ramping up trade with its northern ally and recently agreed to provide lethal support. On top of that, the ruble is strengthening through oil trade, Russia is mining gold in Sudan through the paramilitary Wagner Group, and Putin is dabbling in crypto. The US has overestimated the influence of the dollar on the world stage as China and Russia prove it’s possible to operate without dependence on the world reserve currency.
5. The US banking sector falling apart (again).
International actions aren’t exclusively to blame for the incoming dollar collapse. The Fed’s gross financial negligence has done plenty of damage. It turns out that gratuitous spending and relentless printing don’t make for a stable banking system. Silicon Valley Bank was just the warning shot with experts estimating around 200 banks are at risk of imploding. First Republic Bank recently went under, and regional bank stocks are plummeting as PacWest is looking for a lifeline. Domestic and foreign investors are pulling their money out of dollar-backed assets and seeking protection in hard assets.
6. Central banks piling into gold.
Central bank investments are a reliable barometer of the world’s confidence in the US dollar and the readings are alarming. Over the past few years, the sentiment has been decisively negative, portending a dollar collapse. Central banks continue to ramp up their gold reserves as countries view the dollar as a risk. In the first quarter of 2023, central banks broke Q1 records which amounted to a 176% jump from the same time last year. Unsurprisingly, China is one of the top buyers. The flip side of this modern-day gold rush is a global shift away from the greenback.
Will the dollar collapse in 2023?
It’s impossible to know precisely when the dollar will experience its final beat as the heart of the global economy. However, experts across the board are in agreement that the question is no longer if but when the dollar collapse hits.
Currency collapses happen in slow motion at first. When the lack of confidence comes, it’s a waterfall effect and the currency collapses.
–Sr. Precious Metals Advisor Damian White
The world is shifting away from the dollar for a complexity of reasons including domestic banking failures, the weaponization of the dollar through sanctions, increasing Chinese influence, and the unanimous central bank shift to gold. The bottom line is that the world is losing faith in the dollar at an individual, institutional, and national level.
Investors Find Protection in Precious Metals
In the face of the dollar collapsing, investors the world over are exchanging fiat-backed assets in favor of physical precious metals. These hard assets hold inherent value independent of fiat currency and tend to rise in value as the dollar wanes.
What if everything fails? People used to buy gold more or less as a hedge. Now people are more concerned about absolute dollar failure.
–Eric Sepanek, Scottsdale Bullion & Coin Precious Metals Advisor
Knowledge empowers investors to make intelligent decisions amidst an uncertain economic climate. That’s why we’ve put together a comprehensive timeline tracking the collapse of the dollar. View the De-Dollarization Timeline to stay up to date on the latest changes on the world stage.